{{ searchResult.published_at | date:'d MMMM yyyy' }}

Loading ...
Loading ...

Enter a search term such as “mobile analytics” or browse our content using the filters above.


That’s not only a poor Scrabble score but we also couldn’t find any results matching “”.
Check your spelling or try broadening your search.


Sorry about this, there is a problem with our search at the moment.
Please try again later.

It has been rumoured for some time, and now Microsoft has finally made a move by bidding $44.6bn bid for Yahoo.

The cash offer from the software giant values Yahoo at $31 a share, 60% higher than Thursday's closing share price of $19.18. The approach comes after disappointing fourth quarter results for Yahoo, which has recently become a target due to its deteriorating market capitalisation.

Microsoft clearly feels that a merger between the two firms offers the most effective method of competing against Google's dominance of the online ad market.

According to the letter sent by Microsoft to Yahoo's Jerry Yang:

"Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers."

The letter also reveals that the two companies, as previously rumoured, have been talking about a deal over the past year, and have "discussed a number of alternatives ranging from commercial partnerships to a merger proposal".

Yahoo has yet to respond to the offer, which will not be without its challenges if accepted (notably integration and possible employee disaffection).

Following Yahoo's decision to cull its workforce by around 1,000, Microsoft's talent acquisition team quickly started approaching Yahoo staffers, but now wants the whole company, lock stock and barrel.

It is an intruiging prospect, though the combined market share of Microsoft and Yahoo still wouldn't be enough to match Google's dominant position in the search space. It would, however, provide a better platform from which to challenge Big G.

We like the look of this mooted deal for a number of reasons, including the fact that Microsoft is a significant player in the battle for the living room, having sold almost 12m Xbox units. IPTV is still a ways away, but Microsoft has a real headstart in this area, while Google is nowhere right now.

There has been some discussion recently as to whether Google is a one-trick pony, focused as it is on search. In the years to come, Microsoft-Yahoo would be positioned as more of an all-round media group, rather than a pure search operation, despite Microsoft's traditional software business (which is under threat from many angles).

The enlarged group, were it to happen, would also make a better fist of search. Microsoft has a 20-year strategy for search, and didn't expect to usurp Google overnight, but it needs more focus. Yahoo and Microsoft have struggled in this area for a number of years, perhaps due to the distractions of having a multi-faceted businesses. Both firms are pretty much conglomerates, whereas Google remains a search business.

It remains to be seen whether the deal goes through, but we wouldn't bet against it.

Related stories:
Top online advertising acquisitions of 2007

Graham Charlton

Published 1 February, 2008 by Graham Charlton

Graham Charlton is the former Editor-in-Chief at Econsultancy. Follow him on Twitter or connect via Linkedin or Google+

2565 more posts from this author

Comments (1)


Kaya PPC, Internet Marketing Manager at Optimised Media

It will be very interesting to see what the impact on paid search will be. If it does go ahead which paid search platform will continue adcenter or pandora.
>>Kaya, OptimisedMedia.co.uk website marketing <<

over 8 years ago

Save or Cancel

Enjoying this article?

Get more just like this, delivered to your inbox.

Keep up to date with the latest analysis, inspiration and learning from the Econsultancy blog with our free Daily Pulse newsletter. Each weekday, you ll receive a hand-picked digest of the latest and greatest articles, as well as snippets of new market data, best practice guides and trends research.